Mining Explorers 2012: Hecla Mining Co.

HL: NYSE

Chairman: Ted Crumley

President and CEO: Phillips Baker, Jr.

Vice President, Exploration: Dean McDonald

Plagued with a series of accidents that ultimately resulted in a year-long hiatus of operations at its Lucky Friday Mine in Idaho, Hecla Mining Company is leaning on Greens Creek Mine in Southeast Alaska to sustain its strong financial position and fund a series of growth initiatives aimed at catapulting the 120-year-old mining company to a 15-million-ounce-per-year silver producer by 2017.

“We will spend US$140 million in capital, US$28 million in exploration, US$11 million in predevelopment – and we think we can do all of those things plus some other expenditures that we have within the cash-flow we generate in 2012,” Hecla President and CEO Phillips S. Baker, Jr. informed participants in the 2012 BMO Capital Markets in February.

That cash-flow primarily came from Greens Creek. During the first half of 2012, the mine produced 2.7 million ounces of silver at about US$1.63 per ounce after being credited for the gold, zinc and lead recovered at the underground operation. Going into 2012, Greens Creek had about 98 million ounces of silver in reserves – enough to keep the Southeast Alaska mine in production for about another 10 years, and Hecla sees plenty of potential to continue replenishing these stores of silver in the foreseeable future.

Underground drilling at Greens Creek in 2012 has extended mineralization along trend of the Southwest Bench, Gallagher, 200 South, 5250 and 9a zones. Drilling at the Southwest Bench has defined high-grade extensions beyond the current resources; connected isolated mineralized bodies into continuous zones; and defined a new lens of mineralization. Highlights include intercepts of 0.39 ounce per ton gold, 14.83 opt silver, 10.5 percent lead and 22.4 percent zinc over 17.8 meters; 0.14 opt gold, 56.2 opt silver, 8.8 percent lead and 16.6 percent zinc over 13 meters; and 0.11 opt gold, 3.9 opt silver, 6.5 percent lead and 38.1 percent zinc over 7.5 meters. Drilling of the Gallagher Zone extended mineralization further to the southeast beyond the current resource boundaries. High-grade mineralization at both the 5250 and 9a Zones has been defined beyond the current resources and is open further to the south. Much of the focus of drilling at Greens Creek during the second half of 2012 was on 200 South, where in-fill drilling has confirmed and extended an upper limb that averages 7.6 meters of white baritic ore and a lower limb that averages 5.5 meters of massive base metal and baritic ore types. Hecla said drilling along the southern-most development has intersected massive base metal and white baritic ore types and is expected to extend 200 South some 60 meters south. The Idaho-based miner believes this area of the mine has the potential to be a significant contributor to current and future life-of-mine plans. Hecla also had three drills turning on the surface at Greens Creek from mid-June through mid-October.

Beyond exploration, Hecla allocated some US$90 million of capital to be spent on Greens Creek in 2012, the largest investment in the history of the Southeast Alaska mine. Some of the key capital expenditures include Deep 200 South access development (US$18 million); mining fleet replacement and additions (US$14 million); tailings dam expansion (US$10 million); East Ore access and ventilation rehabilitation (US$6 million); definition drilling (US$5 million); and the construction of expanded and upgraded camp facilities (US$5 million). Production at the Lucky Friday Mine is expected to resume early in 2013.